Q1 2021 Playa Hotels & Resorts NV Earnings Call
Good day and welcome to the Playa hotels first quarter 2021 earnings call all participants will be in listen only mode.
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I'd now like to turn the conference over to Ryan email Executive Vice President. Please go ahead.
Thank you Ali and good morning, everyone and welcome to Playa hotels <unk> resorts first quarter 2021 earnings conference call before we begin I'd like to remind participants that many of our comments today will be considered forward looking statements and are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from what had been communicated.
Forward looking statements made today are effective only as of today and the company undertakes no obligation to update forward looking statements.
For discussion on some of the factors that could cause our actual results to differ. Please review the risk factors section of our annual report on form 10-Q, which we filed last night with the Securities and Exchange Commission, we've updated our Investor Relations website at investors day, Playa resorts Dot com with the company's recent releases.
In addition, a reconciliation to U S. GAAP of the non-GAAP financial measures. We discuss on this call were included in yesterday's press release on that.
Call Bruce word henske, Playa as chairman and Chief Executive Officer will provide some comments on the first quarter and key operational highlights I will then address our first quarter results, our liquidity position and our outlook. Bruce will then wrap up the call with some concluding remarks before we turn it over to Q&A with that I'll turn the call over to Bruce.
Great. Thanks, a lot Ryan.
Good morning, everyone and thanks for joining us.
As always we appreciate your interest in Playa and hope that all of you are in good health and spirits I'll begin today with a review of our first quarter results by geographic segment, followed by insights into the current booking environment.
I'll, then turn the call over to Ryan to discuss our balance sheet provide more detail on our results and on our outlook.
We came in at 2021 enthusiastic and hopeful as our business saw a significant improvement during the holiday period and booking momentum for 2021 was picking up steam.
Many on the while many others in the travel industry as we're experiencing a more volatile recovery with a difference likely attributable to playa is predominantly leisure focused portfolio.
The change in travel guidelines for the CDC in January caused some level of volatility during the first quarter and has sparked a wave of cancellations and significantly impacted our February results as we became even more reliant on extremely close in demand on.
Our operations team and hotel associates once again rose to the occasion and rapidly adapting to the change by offering on site antigen testing at all of our resorts, providing a seamless guest experience given the new COVID-19 testing requirements.
Team's dedication and hard work combined with safety measures implemented to protect our guests have helped maintain market leadership at many of our resorts since a reopening process began last year, we shared with you on our last earnings call that we thought the worst of the restriction related disruption impact was behind us based on an acceleration in booking volume and stabilization.
In our cancellation activity.
This rebound in demand led to a robust March for Playa largely driven by the spring break holidays.
Very quick bounce back was also highly encouraging as a six as it sits signified travelers pent up demand to get back out into the world and enjoy life again.
During the first quarter our business in the Yucatan continued to build on momentum from Q4 with our segment occupancy, reaching a new post pandemic monthly high in March following a pause in February.
Importantly, we did not have to sacrifice on ADR to build guest counts, which is particularly encouraging as we continue to progress through the recovery.
International passenger arrivals into the market also reached a post pandemic high on an absolute basis in the month of March.
As you recall, Mexico did not have any travel restrictions in place with respect to pre flight COVID-19 testing or mandatory quarantines for international tourists upon arrival and notably has remained consistent with respect to these policies.
This has led to less consumer confusion compare to other destinations and has helped sustained business confidence during the reopening phase.
Similarly, the Dominican Republic removed its testing requirements for entry into the country in September in passenger arrivals into the punto kind of airport meaningfully improved as we entered our high season.
Our flagship hides even for Laura Cop Kana was our first resort in the segment to reopen and has continued to be one of the most impressive resort properties in the market.
The Hilton La Romana, we opened in November and has also shown a nice occupancy trajectory through the first quarter, but the segments overall port.
Performance was weighed down by her two ex for externally managed properties, which have lagged our branded hotels in the segment.
Also yield a significantly lower absolute ADR compared to our branded properties.
Moving on to Jamaica March was a very encouraging month for this segment as the flagship Hyatt even to Laura Rose Hall resorts at its best month since the pandemic began and international passenger arrivals had a meaningful step up on an absolute basis versus January and February.
The country's entry requirements continue to weigh on visitation compared to other destinations and will be a constraining factor for the recovery in this segment.
Finally, the Pacific Coast also finished the quarter on a high note with a strong performance in March and international passenger arrivals hitting a new post pandemic high on an absolute basis in March.
Importantly, our occupancy decline has fared better than the passenger arrivals decline in the Yucatan, Jamaica and the Dominican Republic.
Our focus remains on providing a safe enjoyable guest experience minimizing our cash burn maintaining rate leadership and positioning Playa for maximum profit capture as we anticipate that pent up demand continues to return throughout 2021 and beyond.
I believe the pandemic accelerated many trends affecting consumer behavior that we're already in motion prior to the onset of the pandemic with the most notable for us being the shift to direct booking channels. Our focus on direct booking channels has enabled us to ramp occupancy faster than many third party rely on competitors and is leading to share gains.
We realized our current percentage mix shift of direct bookings will naturally move lower as other channels rebound in many of the pandemic restrictions are loosened. However, we are confident our company is well on target with our five year plan to increase consumer direct business to at least 50% by 2023.
In aggregate during the first quarter of 2021, 57% of room nights booked were direct.
19.3 percentage points year over year, reflecting the relative strength of our direct channel and our business model as a whole versus most of our competition during.
During the first quarter Playa resorts Dot com accounted for 24 point for percent of our total bookings up 10.4 percentage points year over year.
Looking ahead to 2021 as a whole as of April 15th Playa resorts Dot Com has generated $76 million of bookings for 2020, one versus $30 million for 2020 at the same time last year and versus almost $39 million for the 2019 comparable period.
Our direct channels continue to recover at a much faster rate than other channels, particularly the extremely challenge tour operator segment.
On the marketing front, we have significantly increased our local in country marketing efforts and believe this strategic move is paying off during this difficult time, particularly in markets, where travel restrictions remain we have implemented contactless QR code access Rada resorts is both a safety measure and as a driver of non pass.
<unk> revenue interest.
And to facilitate the overall ease of the guest experience non package revenue continues to be one of the pleasant surprises of the recovery driven by pent up demand and an improved offering selection.
We continue to believe that we offer a fantastic vacation experience given our large outdoor resort footprint and a focus on guest safety and our performance. Following the revised C. D. C. Travel guidelines further reinforced the view that we expect to be a market leader as the recovery progresses.
With respect to demand and booking behavior. The change in the Cdc's guidelines did not have a meaningful impact on our pace of bookings for the second half of 2021 day.
Demand for the second quarter was impacted as well as our ADR during February and March but demand for Q2 began to pick up significantly since the final week of February and has remained very robust.
<unk> is a glimpse into our business was helpful. As you think about the macro environment and our fundamental performance drivers.
I also want to reiterate on a personal level how meaningful it has been to me for the resorts should be able to ramp up staffing and safely bring back. So many of our world class associates their eagerness to return and deliver service from the heart has resulted in feedback that is truly humbled me.
So again I would like to thank each and every play employee for your contribution during these very challenging times with that I will turn the call back over to Ryan to discuss the balance sheet and what we're seeing in the operating environment.
Thank you Bruce.
Again, everyone I will first give you an update on our liquidity and balance sheet and then reviewed the fundamentals of the first quarter and then finish off with a discussion of forward bookings and market trends.
Starting with the balance sheet and liquidity much like last quarter. We've included a monthly cash bridge on page five of our earnings release to help guide our discussion we began the quarter with $147 million of unrestricted cash and our burn rate improved during the first quarter burning approximately 13, six and $8 million during each month of the quarter with March.
Ex including roughly $8 $6 million of unique items that we detailed in our release, we took significant actions to improve our liquidity during the first quarter, namely an equity capital raise for net proceeds totaling just under a $138 million of which we used 85 to repay our outstanding balance on our revolving credit facility. We also completed the sale of the dreams for driving.
For us for net cash proceeds of roughly $33 million.
All of the aforementioned efforts bring us to a total unrestricted cash balance of approximately $200 million as of March 31 also as a reminder, we still have $26 million of additional restricted cash on the balance sheet from our June 2020 financing.
On the other side of the Ledger, we had no outstanding borrowings on our revolving credit facility and total outstanding interest bearing debt of 1.18 billion I do want to highlight a few additional points. One we do not have any debt maturities until our revolver matures in January of 'twenty 'twenty four.
Side from the $17 million portion of our revolving credit facility that matures in April of 2022, and our term loan does not mature until April of 'twenty to 'twenty four.
Two we are able to draw on the credit line, where the need to arise.
Three should the need arise to make draws on our credit line. The covenant relief period has now been extended until March 31, 'twenty 'twenty two and is only tested if we draw on more than 35 per cent of the balance much like previous quarters, given the limited visibility into our future business will be not we will not be providing burn rate, our EBITDA guidance, but I will say that I'm very pleased.
Our current liquidity profile, given the improvement on our business fundamentals.
We expect our Capex spend for 2021 in the ballpark of roughly $13 million to $18 million for the year.
With an anticipated Q2 capex spend of approximately $5 million also we anticipate making our lumps on deposit payment of approximately $5 million for our insurance premiums during the second quarter, which will impact our cash burn, but not our EBITDA.
I would like to now turn your attention to our group business, we have been quite successful in our efforts to retain group business. That's been impacted by COVID-19 as meeting planners. Appreciate that this recovery appears to be different from typical recoveries in the past and the need to lock in space now is quite high after taking one to two years, all our 2021 group business had been quite fluid.
And currently we're well behind where we were pacing at the same time last year, but more heavily skewed to the second half compared to the first half concentration playa experienced in 2020.
As of now we have approximately $12 million of group business on the books for 2021, but again the majority of it expected to come in the second half.
Mentioned in our last call we had our single biggest my sales day at the end of February and I'm pleased to share with you that our mice bookings have continued to see healthy demand, particularly for 2023 given.
Given the nature of this business and the varied pace of vaccine accessed by country, we expect to see volatility and movement between periods, but for our overall base of group business to continue to build on.
Our 2022 group business on the books is over $24 million in increasing this compares to $33 million for 2020 prior to the pandemic and 29 million for 2019.
The return on this my business should provide a nice base to help manage yields and drive improved profitability year over year. We are very optimistic that 2022 should be a great year for playa.
On the leisure side of group our wedding sales business continued to improve during the first quarter with revenues on the books for 'twenty 'twenty. One ahead of our internal forecast and business on the books for 2022 building nicely as well with respect to advanced deposits as of April 30th we had 35 million sitting with us versus 34 versus $30 million at the time of our last earnings call.
With roughly 40% of that $35 million related to stays in the second quarter of 2021 14 per cent tied to stays in Q3 and eight per cent per stays in Q4.
As a reminder, the majority of our leisure business does not pay at the time of booking.
Now moving on to the fundamentals starting on the Yucatan as Bruce mentioned Q1 fundamentals improved sequentially versus Q4, despite the change in the CDC guidelines at the occupancy ramp alongside air lift into the market as we mentioned in the quarter got off to a solid start but took a brief step backward following the change in travel restrictions and then finish with a strong March we believe.
Our competitors have reopened thus far on the Yucatan and pricing has remained rational despite the available rooms and ramping occupancies.
ADR growth remained solid at the quarter progressed 80 by a very strong spring break and Easter pricing.
Our occupancy decline has fared better than the than the decline in arrivals into cancun further reinforcing our belief that our direct channels are providing a clear competitive advantage, although still a way away similar to what others have said about the second half of 2021 or demand for the second half has remained quite robust. We believe it is of the utmost importance for Maine.
<unk> price integrity and allocate inventory accordingly.
Revenue on the books in the Yucatan for Q3, 2021 is up low double digits versus 2019, and well ahead of 2020 at the same time for respective years.
ADR is also pacing ahead for Q3 relative to 2019.
Revenue on the books in the Yucatan for Q4, 2021 is up nicely versus both 'twenty 'twenty and 2019 at the same time for the respective periods in.
And ADR is also pacing ahead for Q4 relative to about 2020 in 2019.
The demand builds for the fourth quarter relative to the third quarter is likely a reflection of our guests confidence in their ability to travel later in the year as we believe the timing of the vaccination availability has made planning travel more volatile in the near term I would also like to point out that while the data suggests that travelers for fear of missing out has helped us build bookings for the fourth quarter the absolute dollars.
On the books are lower for the fourth quarter, when compared to the third quarter as of today.
Also these pacing fingers are not indicative of our expectation for revenue growth or occupancy levels, reaching 2019 levels is there still a lot of uncertainty around the shape of the recovery.
However, I want to make it clear that we're very encouraged by the current slope of the recovery, thus far and the demand we're seeing on the books.
In the Pacific, We decided to open our Viva Las Cabos as part of our second phase of openings. At this resort is usually more relying on group business and doesn't have any other resorts nearby to cluster demand given the recovery in airlift into the Los Cabos market, which had been leading all of the markets. We operate in Los Cabos came out of the gates very strong Unfortunately, as the fourth quarter progressed demand began to.
Terry rate as travel restrictions began weighing on demand heightened even reported by EDA, which opened on October 1st also followed a similar pattern of demand as Los Cabos, The Pacific segment experienced a larger debt.
A larger degradation in demand in January versus the Yucatan, reflecting a less geographically diverse customer mix with a high concentration of guests coming out of California.
Similar to the Yucatan, although the near term is likely to remain uneven revenue on the books for the second half of 2021 is up.
About 2020 and 2019 in the Pacific.
I'm moving on to the Dominican we began opening our resorts in the Dr. In July of 2020, starting with the new Hyatt Evens, a lock on our and our managed sanctuary cop kind of resort as a reminder, in late July the Dominican government imposed COVID-19 testing requirements to enter the country immediately impeding the momentum we were seeing in the region. The government however, remove.
The COVID-19 testing requirement in mid September and are Dr. Bookings picked up right away airlift into this market remained extremely depressed throughout most of the third and fourth quarter of 2020 that picked up meaningfully in December as we moved into the high season similar to what we're seeing on the Eve of Tan we are materially outperforming the traffic into the destination as the highest devens alarm com has captured market.
Leadership and it become D destination in this highly exclusive market. The performance of these resorts. During this tumultuous period reinforces our belief that our targeted stabilized EBITDA for this property is very much still intact.
We believe our direct sourcing strategy is enabling us to take share and maintain excellent pricing looking ahead revenue on the books for the back half for the second half of 2021, the Playa owned and managed resorts on the Dr is well ahead of both 2020 and 2019 levels at the same time last year.
And as you may recall, Jamaica was shaping up to be our strongest market as we approached Q3 2020, but momentum stalled out once additional COVID-19 COVID-19 testing requirements were put into place in Jamaica and early July severely disadvantaging this destination relative to our other locations.
The locally sourced business has helped occupancy is outside of our Hyatt in this market. It has weighed on our ADR and our mix of rooms sold.
We started to see some additional airlift in Montego Bay beginning in October, but the increases have been had been modest relative to the potential capacity of the market.
Again, we'd like to see COVID-19 testing entry requirements relaxed or removed entirely to increased international demand for Jamaica, and so far we've not seen any meaningful change in demand on the positive side is international return restrictions haven't leveled the attractiveness of the destination.
Currently revenue on the books for Jamaica is lagging versus 2019 for the third quarter 2021 revenue on the books for the fourth quarter is in line versus 2019 and down versus 2020 for the fourth quarter while.
While the improved pacing for Q4 relative to Q3 is encouraging we're still cautious on this segment given the aforementioned restrictions.
Now taking a look at who is traveling nearly 44 per cent of the Playa managed room nights stayed in the quarter came from our direct channels versus 24% in Q1, 'twenty 'twenty, which we believe is a function of the weakness in the tour operator channel revenue being down roughly 73 per cent and otas down roughly 56%, while our direct channel is only saw seven.
Per cent drop geographically our U S sourcing increased for 200 basis points to 67% of managed room nights.
South American source business increased 530 basis points.
Given the current state of travel restrictions globally, our Canadian European and Asian customer mix, all fell dramatically versus Q1 2020.
Our 18% to 34 year old demographic continues to mix ahead of last year, while the 35 to 50 for mix has improved but it's still behind last year and the over 55 year old crowd is still up in absolute numbers, but now mixing lower as a percentage of the total.
Our point redemption room nights booked were down modestly year over year for both our Hyatt properties on Hilton properties. During the first quarter Hilton honors redemption nights were down 40 basis points versus Q1 and accounted for a low double digit mix of room nights booked for our Hilton hotels World of Hyatt redemption decreased 70 basis points and we are a mid single digit percentage of our room night.
Mix at our Hyatt portfolio.
We've mentioned several times on one of the biggest challenges we face on our industry. During the reopening process has been the constant the contraction of the cancellation periods of roughly 24 hours across our portfolio and across the lodging industry generally I won't go into too much details due to competitive reasons, but we did see increased cancellation activity, leading up to the reopening of our resorts across the board, which was in line with our internal.
Rejections and then in October we began to see bookings outpaced cancellation, leading to net positive pickup which persisted into January following the change in CDC guidelines for international entry into the U S. Cancellations. Once again picked up yet we still continued to see net positive pick up as demand persisted for the second half of 2021.
The cancellation levels normalize through the month of February as travelers, we're able to digest the logistical changes imposed by the new restrictions on vaccination levels continued to improve in the United States as.
As you may recall.
Net our booking window lead time heading into the fourth quarter was more favorable than the third quarter. Thanks to advanced bookings for the holiday period and the high season.
The increase in cancellation activity as a result of the change in the CDC guidelines is once again shortened our lead time is defined by the length of business on the books and it's been there, but it is a cancellation activity has subsided and post vaccination visibility on the ability to travel for our guests has improved we believe the quality of our business on the books has improved.
<unk> compared to any point in time post pandemic, thus far.
Case in point, our Q1 2021 average lead time was still ahead of what we experienced during Q3 of 2020, despite the CDC change, which would likely not have happened during pre vaccine time.
In aggregate our revenue on the books for Playa owned and managed resorts for the second quarter 2021 is pacing modestly behind where we were in 2019. During the same time on similar ADR. The third quarter. However is pacing ahead of 2019 levels up 25%.
With ADR up versus both 19 and 20.
The fourth quarter as well ahead of 2019 pace at positive 40% also with ADR is up both versus 2019 and 2020.
Taking this all together, we hope the worst of the pandemic is behind us, but we're still focused on tightly managing expenses and preserving cash one final housekeeping item for tax planning purposes, one of our largest otas sources has elected to bill Playa and others on a gross basis for resorts in Mexico, which under U S. GAAP requires us to gross up some.
Our revenue for these commissions from this O T. A beginning in the second quarter of 2021. This change is expected to increase revenue slightly but then offset by the same increase in SG&A expense on our consolidated P&L, but no change to EBITDA, nor cash flow for comparability purposes, starting in Q2, we.
We'll quantify the incremental change each quarter for you.
With that I'll turn it back over to Bruce for some closing remarks.
Great. Thanks, Ryan.
In summary, we are very optimistic for the recovery to pick up in earnest as we move through this year and into 2022 as demand has continued to build in our direct booking capabilities are enabling us to meaningfully outperform our competitors.
For sure recovery will not be linear nor uniform as we expect to experience volatility month to month as many around the world are still not able to access vaccines, where travel with ease.
Based on the booking trends Ryan shared with you, we anticipate Jamaica will potentially lagged behind our other segments in the near term, but we are confident in the intermediate to long term potential of the market once the effects of the pandemic meaningfully subside as.
As you May have seen we have also been quite active on the asset management of our resort portfolio yeah.
Actions, we have taken over the past year have significantly improved the overall quality of our own portfolio, our own portfolio conserve cash otherwise required to maintain the competitive positioning of our resorts and increased our mix of branded resorts.
Three recent management contract announcements of the Yucatan resort Playa del Carmen under the tapestry brand the Hyatt Viva Riviera Kan coon and need to be converted caffrey resort for the.
High quality additions to our managed portfolio, but these management contracts also have strategic value for Playa as we're becoming a preferred operating partner for owners looking to convert their properties to branded all inclusive resorts.
Additionally, these new additions provide synergies, particularly on the sales and marketing front.
As we continue to demonstrate our third party management abilities I am hopeful more opportunities will present themselves in the post COVID-19 era.
Thank you all for your time, we will now open up the line for your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speaker phone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then.
Kill.
Our first question today comes from Chris for Ryan Carr with Deutsche Bank.
Okay.
Hey, good morning, guys. Thanks for all the all the details you gave out very helpful.
I guess, maybe could you talk a little bit about the Playa dot com channel on maybe.
Where that customer comes from when they book there is it a.
Someone that would go on to our brand website or someone else and maybe how the rates on that business compare to either of the <unk>.
Branded website rates or generic rate.
Sure sure Chris.
Great question.
You know when you look at our whole focus on direct booking rate well, we're trying to do is throw a wider net okay. So historically you know people on booking all inclusive resorts went through tour operator channels and then they kind of gravitate a little bit of Otas as they started to learn about all inclusive and you know got more exposure there.
But they really had no ability to book through branded sites or through a direct site like ours like Playa resorts Dot com. So what we have done and you know we've kind of been highlighting this in our earnings calls is that you know these are things that we had underway with the pandemic really accelerated them right because we had to.
We had to focus on what do we do to get more direct booking while you had a lot of the historical channel really you know shut down or diminished you know the the the amount of volume that had gone through them. So you know we're out there selling just like everybody is selling in a digital world. Okay. So who are those customers you know to your to your question there are a lot.
Lot of them are people, who you know not you know in the past would have considered all inclusive they could be cruise customers no longer cruises for there it could be people looking at you know any leisure trip anywhere you know in the United States or outside of the United States. It could be people that are are you know Hyatt world of Hyatt members or Hilton honors members.
<unk> or other you know our ability for you.
Our affinity programs with other brands so they're they're all of those people, they're all out there looking and what we've done is we've just gotten really better at getting our name our brands our properties out in front of them and that's you know that's really what the pushes so you know when Ryan went through some of the demographics you can see one big group for some of the younger people why.
You know those are people, who do this a lot more rate. The other thing is people who are used to shopping on their phones I will say I get three of my 20, plus year old son, who are giving me advice constantly on you know what we can do better to access our properties and I pass them onto our sales guys. Okay. Because they are like on you need this you need.
That or this is how we book Okay. It is helpful, but but we're just trying to throw a broader net and I think you know the results you're seeing are super positive, okay, and going forward I think they'll continue to be positive and unless you know would be very very clear. Our goal is to be 100% branded and it is not by accident.
Right I mean, our belief is that people you know go to the brands they have confidence for the brands you know.
And they view you know brand says as a as a positive and we do too and then when you look at all inclusive we want to be the dominant all inclusive player with the brands and that's our goal and so you know right now you see that with our heightened our hides even Florida as we continue to grow there we're growing our Hilton portfolio and you know you'll see new announcements in the future.
<unk>, but you know we just want to continue accessing every potential customer and that's our goal sorry for the long answer to your you know probably a question maybe more than you wanted but that's that's what we're going after.
Yeah, No no very helpful. Bruce.
Really appreciate it and then I think we heard yesterday are pretty recently that.
Some of the cancellation policies are especially on leisure business for the brands are going to revert back to pre COVID-19.
At some point this summer or is that or is that your understanding and then maybe talk a little bit about how that how you think that maybe helps your your business build for the back half.
Yeah, well I'll tell you this Chris I, absolutely hope so.
You know there is no reason that we shouldn't be back to normal okay with those policies. It's just crazy right and so you know I when I have discussions with my brand partners I implore that they continue to get more and more disciplined and historically the hotel business has been you know a laggard when you.
Look at Airlines and other travel related companies in a lot of these policies sure when COVID-19 hit everybody had to adjust but you've seen a lot of those things rolled back and I hope that cancellation policies get rolled back, particularly in leisure properties going into high demand months, Okay I'm talking about this.
Summer and then I'm talking beginning in the high season, which for US really begins in November of this year. Okay. So there is no reason that we should be having you know kind of.
You know really loose policies, we really need to be tighter and you know I think that's.
That's our goal.
Right right.
That's great just last one for me is on.
Really encouraging to see you guys getting getting more management contract opportunities.
Can you maybe talk a little bit about how much more is out there not specific fields of course, but just what you might be seeing and does this allow you guys to go well outside of your markets, where you own hotels since since the management side of it as is.
It doesn't have the same kind of operating leverage I mean, just a much more far reaching debt on me.
On the contracts.
Yeah, I mean, I think it's a great growth opportunity for us, Okay, and as we said in our comments there are synergies for it let's face. It if we have more branded all inclusive resorts with any of our brand partners. That's just really good for them and really good for US, Okay, and we can spread our cost, but more importantly, we could spend more dollars right you can spur.
More dollars going after the customers. So your first question Ryan who are these people how do you access that so it's just a really big positive for US. If you look at at what we announced with the ex U.
All three of them. If you look at what we announced the owners of those properties are really sophisticated very large one institutional one big family groups. These are ideal partners for us and it could be straight management contracts. It could be joint ventures. It could be a number of things going forward, but we want to we want to grow and we will.
Throw it net that's wider than our existing markets absolutely you know I think our success, particularly our success with conversions. When you look at the you know what we've done with the numbers when we take on unbranded property. Okay. We reposition it with with our brand and with Playa management with selling direct the result.
<unk> you know the experience is fantastic and what's happening is as COVID-19 decimated you know a lot of peoples.
Resorts and <unk>.
Our segment and others you know they looked at us and they said Wow why are there is doing better than ours and the fact that we're public they can see what our properties are doing and so they came to us and so I'm hopeful that that momentum will continue.
Okay perfect I appreciate all of that all of that detail Bruce thanks.
Thanks, Chris.
Our next question comes from Shaun Kelly with Bank of America.
Yeah.
Hi, good afternoon, everybody on to you.
Bruce can you just remind us of like at this point in a normal season right. I. Appreciate that we haven't had one of those in at least a couple of years now on.
Just how much would we typically have on the books for the fourth quarter I mean, so when we start to see you know we talk about Ryan booking numbers.
Help us get a sense of like what kind of base, we would have or what kind of base those numbers are off of.
Yes, we would we would not have as much as we do today I think that points to the fact that people are wanting to get out of the house, they're looking to their availability to be able to travel on the back half of the year. So typically we would have for the fourth quarter. The back half of the year anywhere from maybe 20% to 30% of our overall business on the books at this time and so that's why you see.
Being such larger numbers on the books now because people's propensity to want to get out and book now and we've kind of talked about on internally almost like a land graph I think people realize as we're on.
<unk> building and then more importantly rate building and it particularly in these destination did they don't grab that land now they've got to rebook later on the pricing will be higher I mean, historically, Sean what you've seen is really early.
Early booking for two weeks you know Easter week Christmas week, right. That's what you see and as to Ryan point now that's expanding right because people are saying Oh.
I need to book earlier in December I need to book in January you know whatever it is they are adjusting for that and so I think that's the big big positive and again, it just demonstrates that pent up demand out there.
And Ryan at least for the U K I think you mentioned ADR is also pacing ahead, sorry, you're rattling off a lot of numbers very fast.
How much is ADR up either for third quarter fourth quarter or just overall.
<unk> were up low single digits in the third and fourth quarter for what's on the books today.
Great and that's what that's low single digit off of 2019 correct yes.
And just what's your expectation then as we get closer to Dave arrival, and you're going in with like a.
Okay. It's just we're not we're not discounting that I'm confident that the demand is going to be there and we don't need to you know kind of build a base like you may do historically and in more difficult times rate coming out of a downturn. So typically you try to build a base at lower rates and then you would yield later, okay, we're not doing that to Ryan's point already.
We're not building a base at lower rates, we're building a base at good rates and then I think our ability to continue to drive those is going to drive you know week by week month by month, as we get closer to it and I'm highly confident of that I've never seen anything like this you know I've been on the hotel business. A few years now about 35 years, Okay and I've been through a few downturn.
<unk> I've never seen a downturn like this obviously the cause of this downturn was very different than you know being driven by you know financial kind of metrics and so you know the people have the money they have the desire, okay and other waiting for.
Individual reasons for.
Going out there and traveling so I don't think it's going to be a demand issue and so I really think we can continue to drive it than if you look at a couple of things you know that we have put in place over the last year, okay with with rolling out <unk> and some other revenue management programs. Those are all fully implemented at this point in time, so we have the tools.
And we didn't have in the past okay. Two to yield also you know historically the way it worked in the other.
All inclusive business was you would give you now.
Static rates to two distribution channels like tour operators and those rates could be there for 12 or 18 months you didn't even have the ability to change on okay. Now we are 100% dynamic. So if we see you know the business growth, we can adjust the rate and we just didn't have that flexibility. So I think we're well positioned to.
Continue to drive the rates up as the the demand materializes.
Thanks, everyone and maybe my final question, our thought would just be around on it.
Jamaica rate it seems like we got very good sightlines in the Dr and then.
In Mexico, but what kind of what are you looking for what's going to be the tell on when we get things to turn back on and how are those conversations going on.
With with Jamaica, where do we think there'll be on the curve do you think we're going to Miss the holiday see I guess the direct question.
Or at risk of Michigan missing this coming holiday season, or do you think that is in play based on the tone of conversations.
I do not think we're going to Miss this holiday season is the short answer I was in communication with the government in Jamaica as recently as last night at about 11 30 P. M. Okay, and you know it really the way I focus on it with them is look what the Bahamas just did okay. So the Bahamas, just made an announcement that they are no longer.
Requiring.
<unk> co.
COVID-19 testing for entry into the Bahamas, the quarantine mandatory quarantine et cetera for vaccinated travelers, okay. That's huge and so the push on making with the Jamaican government is saying look and they've been really lock step kind of with what the Bahamas have done.
Testing requirements I mean, almost exactly so I'm, saying, hey look what the Bahamas. Just did this is what you guys need to do and so I'm pretty hopeful that that Jamaica is going to look at that and it will make sense a lot of this you know these are small countries.
We're concerned about you know the medical systems in the countries and very much kind of a political perception, but if you're able to say hey, we're only releasing or easing of these restrictions for vaccinated travelers and the risk to infection and in our country is incredibly low there's no political issue. So I think youre going to see Jamaica by necessity.
City matching what what the Bahamas, we're doing at a minimum hopefully we get to the point, where you know all restrictions are lifted and I think that could happen sooner rather than later too. So I don't think you know Jamaica.
It's gonna Miss out I think theres going to be a big increase once once they're released like Ryan was pointing out with the Dominican right as soon as the Dominican change.
<unk> for their policies are business went up I think we're going to see that pretty rapidly as soon as Jamaica does the same.
Super helpful. Thanks, everyone. Thanks.
Thanks, Sean.
Our next question comes from Steve <unk> with Citi.
Yeah.
Hi, Thanks.
I just wanted to follow up a little bit on songs.
Question. So just to clarify you said that revenues are up 25% revenue on the books in the third quarter and 40% on the fourth quarter relative to 2019.
That's right.
Okay, you kind of buried the lead there Ryan I think.
So my question is if the.
Rates are low.
Modest single digit that would imply then that I guess the occupancies are well ahead of where you would normally be on the 20 to 30 per cent range. You said. So can you just share like what kind of occupancy on the books now.
If all of that business to kind of flow through.
Yeah, No youre right there is and it just goes back to what we've been saying that that folks are booking a little bit further out now or they are looking for at least try and lock in vacation later in the year. So we're seeing more on the book higher occupancy than we've ever seen before and I was trying to make it clear on the prepared remarks that you know obviously, if we're ahead, 40% in the fourth quarter I don't believe that by the time, we get to the fourth.
There will be a had 40% over 2019 right and the fact that the absolute net the absolute revenue that's on the books for fourth quarter, it's still smaller than than what's on the books for the third quarter at this point on what Youre seeing as people booking further out with her desire to get out on travel. So youre right that does imply that occupancy or certainly ahead.
Okay, and when you look at that.
The components of that booking is it still mostly coming through are coming at the same rate through the direct channels or is there some signs that the tour and travel group for us are starting to see a pickup in business you have.
Seeing slight pick up but its still the direct channels on what we're seeing them.
Come through most strongly you're absolutely right.
Okay.
Okay.
Thank you.
Thanks Nathan.
Our next question comes from Patrick Scholes with <unk> Securities.
Hi.
Good morning.
Good morning, Patrick.
Question are you seeing at your properties are you seen any of the.
Labor availability and wage pressures.
Our U S hotels are seeing at the moment. Thank you.
Thank you for your question. So I think if you look at a big difference between us and kind of the situation with lodging companies owners in the U S is we're in a completely different situation than they are right. So if you look at the dynamics, what what happened in the U S with labor, Okay, you're on to bid.
Groups, one are all the people there.
Lost their jobs and they moved on they moved on to other opportunities because you know in many segments, you know, whether it's Amazon or others, there's opportunities right. So they've got new jobs they've moved on the other thing you had is the government had very strong.
Strong unemployment benefits and interest.
The group of people, who are like Hey, I'm not that motivated to go back because you know I'm getting really high unemployment benefits. So you know until those ease up and I believe that's in September you'll see the pressure. So you don't on the hotels are going to have to.
Bright people to come back and it's going to be at higher rate and it's gonna be a challenge for the for the margins are situation completely different right. There are no other jobs, okay. The jobs in the country.
Nations are resort travel dominated jobs, Okay, you know Jamaican Dominican even in the Yucatan, Los Cabos, where do they aren't though.
That's the game in town rate tourism travel as the game in town for the people while the government has done an effective job okay. It hasnt been as attractive for beneficial you know as it would be so they are eager to get back. So what we did is early on as soon as we started the reopening process. We started to bring back our goal was to bring in.
100% of our people now 100% doesn't mean full time on 100 per cent of our people we bring people back for one or two days and then we bring back and other person for one or two day. So we may only be bringing about 40 per cent or 50 per cent of the people. So they are at reduced hours, but it's the higher number of people that was an intentional okay. We wanted to make sure our people know.
We knew that we wanted them back okay. So we've been able to retain the people we wanted to retain and we still remain a very.
Desirable employer and all of our markets, okay, but the people want to work and so we're not seeing the rate pressure that you're seeing in the U S and you're not seeing the supply issue that youre seeing in the U S. So I think we're in a really good position and I think you know it's gonna be a positive for us where I think it's going to be a negative for.
For others.
Okay. Thank you for the color on that and then just one modeling question on.
Once you Werent, even certainly your SG&A was below.
Our expectation for how should we think about the trajectory of that SG&A for all the quarters for the rest of the year. Thank you.
Yeah. So we are starting in kind of Q3 and Q4 last year, we did start layering some cough backend mostly on salary and wages.
Body in the company took salary and wage cuts and certainly just like everybody else in the industry we.
I have a moratorium on TNT and travel and things like that and so we are not currently in a position to start ramping back up new Ftes I think there's a good portion of the of the SG&A cuts that will remain permanent I.
Do think what Youll see right now what we're planning for is probably in the back half of the year, assuming that this kind of the shape of the trajectory continues you might see us start spending a little more on teeny and filling out some other FTE positions that we need as we ramp up our third party management business with these new properties coming online, but right now it's not our intention to start ramping things up too to Cigna.
Secondly from where they are today.
Okay, well. Thank you everyone. That's it.
Thanks, you bet.
Our next question comes from Tyler battery with Janney.
Good morning. This is Jonathan on for Tyler Thanks for taking our questions first one for me you guys have provided some excellent color so far on the back half bookings.
And Bruce in the prepared remarks, you highlighted the CGC restrictions not really having an impact on the pace of bookings in the back half for the year and.
And I'm just curious.
A further positive of that if you think theres still some incremental demand that gets lifted over the summer or later in the year or is that kind of a non factor going forward.
No. It's definitely a factor so I think you know, let's just clarify because I think I really appreciate your focus on this issue because it's an important issue for us we expected when the announcement was made we expected it to have a much worse and much longer kind of duration of an impact. Okay. What are positive surprise was was that.
It was kind of really negative right out of the blocks. It ended pretty quickly I shouldn't say it and it diminished really quickly. Okay. So yeah. So all of our points about the second half of the year and obviously, we've given the numbers on the second half for the year you can see that wallet is still there you know, it's not having that big of an impact why is it not having that big of an impact I think there's two big fat.
<unk>. One is people are used to a lot of things right for use of social distancing, they're used to wearing masks are used to you know.
Plain and airport restrictions for all kinds of things likewise, they're like Okay worst case I have to do testing to get back ill do testing to get back well you know what do they care about they care about it's really easy to do okay, just not going to impact them and that there's a very low probability that theyre going to have any issues right and so what you see as well.
Our focus was was putting it at the resorts, okay getting the testing at the resorts. So we're trying to make it as easy as possible and the fact is the results. The positive results have been incredibly low rate really really low and that's because people are getting tested before they travel now a lot of people are vaccinated et cetera, okay, but its still in everyone's mind. So you look at your makeup.
Right. The fact that Jamaica is below is because people don't want to deal with the hassle of getting tested going into Jamaica, right, they're kind of accepting to of the fact that to get back to the U S. They have to get tested and they're really happy that we're doing it on property and if so well done and easy and they see that in all of the social.
He opposed etc, okay, but let's be clear if that has lifted that is going to be hugely positive because there is a big big group of people okay.
I don't want to take the risk rate I don't want to take the risk of or maybe the hassle whatever it is they don't want it and they're not going to travel while that restriction remains in place. So the day that gets lifted I think we're gonna have a big increase in bookings.
Directly as a result of that.
Okay, great. Thanks for all that detail and then Ryan you touched on this in the prepared remarks, but I'm wondering if you could provide some additional color on what you're hearing and seeing with respect to the air lift in your markets how much of a factor that remains and if theres any market for.
Which markets are seeing outsized growth in the lift.
Yeah. So as you would imagine it follows suit with just the performance of our portfolio. So what you've seen in Mexico has certainly outpaced site on the Dr which is outpacing Jamaica.
Load factors improved in March versus January obviously February didn't with the cancellations because of the CDC requirements.
But it improved in March versus January for all of our markets.
You know which is pretty encouraging.
What we look at you know the same data that you all see about international Hospital passenger Rivers' and then we also take a look at forecasted seats into our markets now, it's a little bit harder to kind of set your watch by as he said other scheduling into the market because there are certainly still subject to change, but what we're seeing in the fourth quarter is actually pretty good particularly.
<unk> income.
<unk> Kun and <unk>.
Montego Bay, specifically from the United States is still only slightly up or flat, but everyone else is for getting larger amounts of seats coming into the destination specifically from the U S. Not as much internationally as you would imagine but more from the U S. Q3 is still a bit of a wildcard right now I think we touched on it a little bit earlier, when we talked about the recovery I think a lot.
That has to do with in a consumer's assumption on just the general, particularly in the U S population that life will be somewhat back to normal meaning I may be back in the office you know my kids maybe back in school in person and so there's we've seen more volatility not just with airline seats forecasted, but with our bookings generally in the Q3 versus what we're seeing positively.
In Q2 and Q4.
Okay, great. Thank you for all the color guys very helpful. That's all.
Thanks, Jonathan.
Our final question today comes from Chad Beynon with Macquarie.
Hi, Good afternoon, Bruce and Ryan Thanks for taking my question.
Thanks, Chad.
One wanted to.
Go back to your general segments. Your your group my sweating, etcetera business versus the leisure business across.
For your portfolio or at least the ones with with more group offerings should we expect a meaningful meaningful change in terms of the percentage mix of one versus the other and hi.
Hi season, or 2022, given some of the trends that debt you know, we expect to see and if so what's the general directional impact of revenues and margins.
This does change thank you.
Yes, so from I think from let's start with the weddings I don't think Youll see a shift in when people want to get married because our properties are warm year round and then people a little more agnostic, they're outside and we're seeing that business come back more rapidly than the group business, because our weddings or outside of smaller groups. It's usually familiar groups. So they are less.
Read about.
That could be on the top of mind, including return vaccinations or anything like that on.
On the group side, you're really talking into larger convention or if you're really just talking about the three properties, where we have you know 50000, plus square feet of meeting space that being historically, Jamaica, and Los Cabos as even the Lora, Jamaica and zebra Las Cabos, but now is even though on our top corner.
That helps our margin significantly when at those properties when the business comes back, namely because one the rates are pretty fantastic. The commissions that you pay meetings incentive planners, there's not too much higher than what you see from our direct channel. So if our direct is anywhere from call it 3% to 8% depending on how the customer came to us.
For a property, meaning incentive planners is in the low double digits right. So it's so much cheaper than O T. A R. R. Obviously tour operator business and then on top of that because the vast majority of our group business is kind of incentives business, meaning like top sales men President's club gold clubs and stuff like that it usually paid for by their company. So people are coming with a friend or a <unk>.
And they are spending a lot more on non package items like sparse reps wide upgrade and then the group itself is doing a lot of large events on the beach or additional upsells and that has high profitable margins.
Revenue for us so at the group comes back I don't see it shifting any different than the time of year that normally shows up but at those properties that should help margins.
Okay, great. Thanks.
Then once we get.
Through this and we're more on a normal free cash flow period. How are you thinking about you know some of these conversions expansions that you've talked about in prior years.
You know obviously nothing to talk about in 2021, but how are you thinking about those opportunities versus other.
As of capital deployment like share repurchases that you've done in the past. Thank you sure I mean, obviously like I said the conversions are hugely profitable to US. Okay. Now if you look at what we did right. We sold some properties, which which are those properties. We sold the ones that are required very large capex dollars, okay and didn't really fit well with our strategy.
They werent high highly attractive candidates for brand branding convert branded conversion. Okay. So we've got the ones left and so you can kind of just look at our list of portfolios and you say, okay. Here's the ones left that arent branded you know that haven't been converted what you know what needs to be done there you know not much I shouldn't say not much not as much.
It needs to be done so we don't have the significant level of capex or or disruption that you've seen in the past. Okay. So as we look at 2022 and beyond for <unk>.
Those non branded properties there are opportunities there to convert and it will be willing to do that and you.
Beyond that are you know.
The cash flows whatever makes the most sense you know when we will analyze the cash flow and lets you know.
Take care your point about hey, we'd get back to our normal world and lets face. It you know Playa as normal World is we were really high free cash flow generating company and I can't wait to get back to that normal world right and we can start focusing on what are the best things to do with that cash and that's really where does that drive the most value for our for our stock on our for our shareholders.
And to answer your question directly on buybacks of course, we'd be open to reopening that once we get further along through the pandemic, obviously were still on cash conservation mode.
Obviously, we're getting closer and closer to stopping burning cash, which is great. Obviously, when it get progress a little bit further, but that's certainly something we would consider.
Particularly given where you think you know the fees.
But it could go that would imply that our stock is trading pretty cheaply on kind of run rate EBITDA. So we'd be certainly open to that we'd have to discuss it with our board.
Great. Thanks, I appreciate it guys best of luck.
Thanks for that.
This concludes our question and answer session I would like to turn the call back over to Bruce for Danskin for any closing remarks.
Great. Thank you so just to close I just I just wanted to emphasize.
That I am cautiously optimistic about the rest of 2020, one and much more optimistic for 2022 and beyond.
As vaccines continue to grow leisure demand will accelerate imply resorts should be incredibly attractive.
Attractive to people to go to we expect to continue reporting positive results for the foreseeable future. So I think really the horizon looks good everything looks good again.
Again, thanks for taking the time to join US today and I hope everyone has a great day. Thanks for your interest in Playa.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.